The Wall Street Journal reports,''escalating tensions over Russian military intervention in Ukraine rippled through Europe’s banking sector Monday, hitting banks exposed to Eastern Europe''.
The prices of European bank stocks and bonds tumbled, some banks operating in Ukraine imposed limits on withdrawals from their cash machines, and one bank put on hold the process of selling its Ukrainian unit.
Russian banks suffered the most, with London-listed shares of OAO Sberbank and OAO VTB, the country’s two largest lenders, fell more than 16% and 18% respectively.
Foreign banks with operations in Russia or Ukraine, including Austria’s Raiffeisen International AG, Italy’s UniCredit SpA and France’s Société Générale SA, also got clobbered. Raiffeisen, which has 12.1% of its assets in Russia and 3.4% in Ukraine, saw its shares fall about 8%. Shares of UniCredit and Société Générale, which owns one of Russia’s largest retail and corporate banks, both fell about 5%.
Raiffeisen said in a statement Monday that it is temporarily halting its planned sale of its Ukrainian unit, Bank Alva. Raiffeisen said it has received multiple offers for the business. The process “is on hold for now, however, due to the situation in Ukraine.”
UniCredit’s unit in Ukraine announced on its website that it was limiting cash withdrawals from its ATMs to 1,500 hryvnia, or about $150, per 24 hours. The bank said it was taking the step “in order to provide all the clients with an access to cash money” and that the limits would be removed “in the nearest time with the normalization of the situation.”
UniCredit’s move came after Ukraine’s central bank last week imposed limits on withdrawals on foreign-currency accounts, barring customers from withdrawing more than $1,500 or the euro equivalent. There were no central-bank restrictions on hryvnia accounts.
Ukraine’s impact on western European banks will be more limited than it would have been in the past, as direct cross-border exposures are less than half their level in 2008, said Elena Romanova, an analyst with Raiffeisen International. Prior to the financial crisis, European banks were chasing market share in what they perceived to be one of the continent’s last high-growth markets. However, those banks now hold less than 20% of Ukrainian bank assets.
Neither of Russia’s top two banks have much of their balance sheets tied up in Ukraine. VTB’s $8 billion exposure represents about 3% of its total assets, while Sberbank’s $4.5 billion exposure is 1% of its assets, according to Bob Kommers, an analyst with Deutsche Bank in Moscow. The chief executives of Sberbank and VTB said last week that they had suspended new loans to Ukraine but intended to stay in the country over the long term.
“But today’s price moves are hardly related to Ukraine exposures,” Mr. Kommers said. “What’s happening today is that people are factoring in higher country risks” for Russia.
The market turmoil pushed up Russian banks’ costs of market funding. VTB saw the yield on its benchmark notes jump by 0.6 percentage point to 7.25%, according to Tradeweb. The rise is potentially problematic, as VTB gets more than half its funding from the capital markets, Mr. Kommers said.
VTB declined to comment on the impact on its business. Sberbank didn’t immediately respond to a request for comment.
